The impact of recent financial shocks on the financing and investment policies of UK private firms

► The findings of this study highlight that the recent credit crisis has adversely affected the leverage ratio of private firms. ► This effect is most significant on short term financing channels such as short term debt and trade credit. ► As a consequence, private firms hold cash and issued equity for hedging against the negative effect of credit contractions. ► The findings further highlight that credit contraction has negatively affected the performance and investment of private firms and firms which are unable to find alternative sources of finance may bear a much larger cost compared to those who manage their financing more appropriately.